job creation continues at that level in the establishment survey, then you would get a tenth maybe every other month kind of thing. so gradually declining, but we don't have that kind of precision in this. you're right though, and i read out some of the reasons. we do think the labor market is still cooling by many measures, and we're watching that closely. it's not cooling in a quick or, in a way that really raises concerns. i think, you know, you pointed out participants in the fomc really thought that the risks and uncertainty had improvedded relative to the labor market, and it's because with things have just gotten a little bit better. it doesn't -- unemployment rate flat and things like that. nonetheless, you know, we're watching it closely. >> reporter: if the idea though is no additional kind of softening in the labor market is welcome here, what's to prevent that if rates are still restrictive? >> so what i said is we don't think we need further softening

to get to 2% inflation. that's what i'm saying. not that it's not welcome. we don't need it, we don't think, you know? if you had a situation where inflation's moving around by a tenth every few months, that's, you know, we'd have to weigh that against the fact that inflation has in recent months been moving sideways in the 12-month window. and so we've got to weigh them both at in this point. for a while we were only really focused, main hi focused on inflation. we've now gotten to a place where the risks of the two we think are broadly, roughly, in balance. and so that's how we think about it. >> steve. liz: breaking news, the markets may have liked the federal reserve slicing and dicing for the third meeting in a row, but they are diving right now. the dow just went down 500 points as a fed chair jerome powell just indicated that due to sticky inflation, the fed may or move more slowly next year.

let's head back to the news conference. >> finish naming the phase -- [laughter] yet. but we may get around to that. but, no, i would say we are, though, in a new phase in the process, as i said. so -- and that's just because we've reduced our policy rate by 100 basis points. we're significantly closer to neutral. we still think where we are is meaningfully restrictive. and i think from this point forward, you know, it's appropriate to move cautiously and look for progress on inflation. we've, you know, we've done a lot to sport if economic activity -- to support economic activity by cutting 100 basis points, and that's a good thing. e support the decision, and i think it was the right decision to major i think for now we are in a place where the risks really are in balance, and we need to see progress on inflation. and if that's how we're thinking about it. sos it is kind of a new thing. we moved pretty quickly to get to here, and going forward, obviously, we're moving slow slower which is consistent with

the sep. >> wonder if i could follow up and ask you how much you or the committee are looking through some of the high numbers we have had in the recent inflation numbers. for example, cars being up maybe because of the hurricanes, eggs because of the avian flu, that kind of stuff. and then looking forward perhaps to housing inflation coming down as it did in the recent report. >> so we -- yeah. we always try to be careful about not throwing out the numbers we don't like, you know? it's just an occupational a hazard, is to look -- those high months are wrong. what about the low months? we have a very low month, potentially, in november, you know? it's estimated by many to be in the mid teens for core pce. so that could be idiosyncratically low. we shouldn't -- our position shouldn't change based on two or three months of good or bad data. we have a long string now of inflation coming down gradually over time. as i mentioned, 12-month, i

think, 12-month headlines, 2.5. 12-mother month core is.8 -- 12-month core is 2.8. we need policy to remain restrictive to get that work done, we think. >> neil. >> reporter: thanks, chair powell. neil irwin from axios. financial markets have been very buoyant really all year. is the committee comfortable with where financial conditions are, or do you see a risk that looseness in financial conditions could undermine progress on your inflation targetsome is. >> so we do look carefully at financial conditions, of course, that's part of what we do. but what we really look carefully at is the performance of our gold goal variables and how are we affecting the economy. so what we've seen over the course of just take the last year, we've seen inflation -- well, over the last couple of years -- come down a lot. we've seen the labor market cool off quite a bit. of that suggests that our policy is restrictive. we can also look more direct

directly at the parts of the economy that are affected by, that are interest-sensitive particularly housing. housing activity is very low. and that's significantly because of our policy. so we think our policy's working, it's transmit, and it's the having the effects on our goal variables that we would want. you know, a lot of things move financial conditions around, as you know, and we don't really control those. but i'd say we see the effects we're hoping to see on the goal variables and the places where we'd expect to see it. >> if i may, speak of assets that very buoyant, do you see value or benefit in the u.s. government building a reserve of bitcoin? >> so, you know, we, we're not allowed to own bitcoin. the federal reserve act says what we can own, and we're not looking for a law change. that's the kind of hinge for congress to consider, but we are not looking for a law change at the fed. >> andrew.

>> reporter: happy holidays, mr. chairman. thanks for taking our questions. i was wondering if you are satisfied with the way 2024 is ending, if you're confident that we've avoided the resession that forecasters -- recession that forecasters were predict as inevitable a couple of years ag. >> i think it's pretty clear that we've avoided recession. i think growth this year has been solid, it really has. private domestic final purchases, which we think is the base indicator of -- best indicator of private command -- demand is looking to come in around 3% this year. this is a really good number. the u.s. economy has just been remarkable. and in these the international meetings that i attend, this has been the story, how well the u.s. is doing. and if you look around the world, there's just a lot of slow growth and continued struggles with inflation. so i feel very good about where the economy is and the performance of the economy, and we want to keep that going.

>> the other thing i just wanted to is ask about was the -- you guys have noted that the unemployment rate is still low. however, employment rates have fallen rather quickly. the prime age employment rate fell by about half a point, half a percent, rather, recently. the question, i guess, is do you think there's maybe more downside momentum in the labor market than the unemployment rate alone is signaling? >> i don't think so, no. i think overall if you look at it, prime age participation is still very high. what's going on in the labor market is that the hiring rate is lowful if so if you have a job, you're doing very well. and layoffs are very low, right? so people are not losing their jobs in unusually large numbers. if you are looking for a job though, the hiring rate is low. and that's the signal of lower demand. it has come down. so we look for signs like that. and that's clearly a sign of

softening, further softening. i didn't mention it earlier, but i think you can see an ongoing, gradual softening mt. labor market. again, not something we need to see to get 2% inflation. and, you know, that's part of the reason that explains why we moved ahead today with our, with the action, with an additional cut. but you take a step back, the level of unemployment is very low. again, participation is high, wages are at a them -- healthy and ever more sustainable level wage growth, so the labor market, this is a good labor market and, you know, we want to keep it that way. >> [inaudible] >> reporter: thank you. i just want to put a finer point on the labor market. can you keep the labor market this way, in the strong position that you have described, without further cuts? in other words, do you still view the labor market as needing support to protect against a further -- [inaudible] >> you know, we can't know that

with any tremendous certainty. i say that we hi that our policy balances -- we think that our policy balances the risk. we hi the risks are roughly in balance as between the two mandates, and we think the labor market is in solid shape. and when i say it's softening or cooling, it's a very gradual process, you know? job creations are meaningfully positive. wages are, you know, if anything, a little -- still a bit above what would be sustainable if productivity were to revert to its longer-run trend. if you take into account the high productivity readings we've had, wages are already at a sustainable level relative to 2% inflation. so if, again, i don't want to overstate the downside in the labor market because the downside, clearly, they appear to have diminished. nonetheless, it's one of our mandate goals, and, you know, we pay close attention to it. and it's the worth noting that it is still garage aally cooling. gradually and in an early way.

and that's how i would characterize it, and that's why we're paying careful attention. >> elizabeth. >> reporter: thanks so much, chair paul. abc news. as you've noted, the fed is saying high prices are still a burden for so many households right now. why do you think it is that inflation is proving to be more stubborn hand you'd expected? -- than you'd expected? >> you know, it breaks down into a long answer if you want, but it just has been a little bit more stubborn. i think if you go back two or three years, many people were saying that to get this far down, we would have had to have had a deep recession and, you know, high unemployment by now. well, that has not been the case. so, you know, the path down has actually been much better than many predicted. we've managedded to have the unemployment rate remain essentially at its longer run natural rate while inflation has

come down from, you know, core p if ce inflation has come down from 5.6% to 2.8% on a 12-month basis. so that's a pretty good outcome. why hasn't it come down? one reason is just a technical issue around the way we calculate housing services. and that process has been slower than market rents have, are showing up more slowly in that measure than we might have thought three -- two years ago. that's parking lot of it. i think there are other parts of the story, but, you know, what i think people are feeling right now is the effect of high prices, not high inflation. so we understand very well that prices went up by a great deal, and people really feel that. and it's prices of food and transportation and heating your home and things like that. so there's tremendous pain in that burst of inflation that was very global. this was everywhere, in all the

advanced economies at the same time. so now we have inflation itself is way down, but people are still feeling high prices. and that is really what people are feeling. the best we can do for them -- and that's who we work for -- is to get inflation back down to its target and keep it there so that people are earning, you know, big, real wage increases so that their wages are going up, their compensation's going up faster than inflation if year upon year upon year. and that's what will restore people's good feeling about the economy. that's what it'll take. >> and as we look ahead to next year, what do you see as the biggest challenge to the economy under the next administration? >> i feel very good about where the economy is. honestly, i'm very optimistic about the economy. and it's -- we're in a really good place. our policy's in a really good place. i expect another good year next year. >> edward. >> reporter: thanks, chair

powell, for the questions. edward lawrence from fox business. you say we're closer to the neutral rate. what percent do you see and the committee believes, where is that neutral rate? [laughter] >> so i'll say a couple things. first of all, when we, the thing we write down in the summary of economic projections is the longer run neutral rate which is the neutral rate at a time when supply and demand are in balance, the full economy's in balance and no shocks are hitting the economy. that is not where we are right now. so when we're make monetary policy at the fed, that's not the question we're asking. so you can't do a straight read between those longer run numbers we write down and what we think the appropriate policy should be. so basically, at any given time various shocks are hitting the economy. and so what we're doing in realtime is we're looking at our policy stance, and we're looking at the way it's hitting the economy, and particular particularly we look at the effects it's having as we try to move the economy toward maximum

employment and price stability. and the answer can be there are things that affect the economy that are lasting but not permanent, and the ones that are permanent are the ones that would be in our star. the ones that could be lasting but nonetheless go away over time, they could affect what's sort of technically the appropriate neutral stance in near term. so we're looking at that, and, you know, we don't know exactly where it is. but as i like to say, we know it by its works. and i think what we know for sure is that we're 100 basis points closer to it right now. there are many estimates of where that might be, and we know we're a lot closer to it. and i think we're in a good place. but i think from here it's a new phase, and we're going to be, you know, cautious about further cuts. >> reporter: but i think the markets are looking for a little more clarity. i've heard estimates from 2.9% to 4%. i think the markets would like to the see a little more clarity about a year out, 18 months out as to the where that goalpost, for lack of a better term,

because at the moment it looks big. >> honestly, there are countless models of what a neutral rate a might be at any given time, empirical, theoretical models, and they have as many different answers as a you'd like. so there is no real certainty. i mean, it's actually a good thing to know that we don't know exactly where it is. so you're not tempted to think, oh, i think this model or this estimate is right. you just have to be open to, you know, the empirical data that are come anything and also how it's affecting the outlook. and it's not made any easier by the fact that our policy works with long and variable lags. nonetheless, that is the job we have, and so we're -- i think we need, it's appropriate for us now to proceed cautiously now that we're 100 basis points closer to neutral. and we'll do so. meanwhile, the economy seems to be in good shape s and tease cuts will certainly help to support economic activity and the labor market while we can still make progress on inflation

because policy's still meaningfully restricted. >> victoria. >> reporter: hi, victoria -- with politico. i just wanted the make sure i understood what you were saying at the beginning about inflation. are you saying that progress on core pce counts as progress on inflation even if headline inflation ticks up? and then also, since that's what's projected in the sep, i was wondering what accounts for that. why do you all see core pce going down and potentially headline inflation ticking up? >> so, and as i imagine you know, you know, the goal overall is headline inflation because that's what people experience. people don't experience core inflation, they experience inflation. and that includes good and energy costs. that's the overall goal. but as we know, headline inflation contains energy and food, and those prices can fluctuate for reasons that are

not related to tightness in the economy and, therefore, are not really good predicters of future inflation. so it turns out that core inflation is a better predicter of overall inflation than overall inflation if is. so we look at core inflation because it's a better measure of what future inflation is likely to be because it's a better measure of what inflation pressures exist. so that's -- it's complicated, but ultimately, you know, our goal is headline. not core. so your question was, your second question was what? >> reporter: why do you all see core going down, headline potentially ticking up? >> so headline can be affected -- you're talking about next year. >> reporter: uh-huh. >> reporter: yeah. so headline, again, it can be affected by food and energy prices. so there will be things in the headline forecast that are to do with forecasts in energy prices whereas core will be -- if you look at core going out a full year, then it'll be much more driven by things like tightness

in the economy. so that's -- the two can go in different directions. headline has been lore. as you to know, most of this year. but that's because energy prices have been coming down, which is a great thing for people. but energy prices will come down, and they will go up, and it won't really be telling us anything about how tight the economy is and how future inflation will perform. >> reporter: do geopolitical risks factor in at all? >> we monitor geopolitical risks really quickly -- really carefully, rather. but, you know, i would say so far those risks haven't really -- nothing has come out of those risks that has really been important for the united states' economy. the single thing that you would look to is the price of oil given that we're talking about the middle east and ukraine and, you know, but that is a good summer statistic for the kind of thing that could go wrong in, with global turmoil. but the price of oil's been coming down. because of supply conditions,

global supply conditions. so the u.s. is not feeling really the effects of geopolitical turmoil. but we are certainly at a time of elevated geopretty are call turmoil, and it remains -- geopolitical turmoil, and it remains a risk. >> kelly. >> reporter: thanks, chair powell. kelly o'grady from cbs news. you said a minute ago that wage growth is outpacing inflation now. it wasn't the case for some time, of course it's partly why americans haven't felt much relief in their wallets from prices yet. but with inflation ticking up, how worried are you the progress in closing that gap could go away? >> yeah, i -- so inflation, again, we don't overreact to the couple of months of higher readings or a couple of months of lower readings. we had four months of really nice readings, and then september and october were higher, but then november is much lore. so i don't really hi the public is experiencing that as a surprising upside risk to inflation. i think inflation is much lower.

what the public is feeling, and they're right about it, is that prices are -- the price level went up because of past inflation. and it's going the take some time to, for real wages to recover over a period of years in which your real compensation is growing. in other words, your compensation's growing meaningfully faster than inflation. that's exactly the kind of economy we have now, and we just want to hold on to it. that's what's going if on right now. i don't think that, you know, a couple of months of higher inflation really signal that anything of the nature you're suggesting. >> reporter: and just one follow-up. let's look more long are term. you previously predicted hitting the 2% inflation target in 2026. it's now been pushed out to 2027. finish you said you're focused on enabling further progress on inflation. that's not necessarily progress in the right direction. are you confident that target

isn't going to move further out? >> we're talking about -- when you're projecting the economy, you know, three years out, two years out, you're talking about high uncertainty, very high uncertainty, you know? we really at that point, it's not, that's not possible to confidently predict where the economy's going to be in three years. so what we're doing is we're looking at what's happening now, and we're kind of projecting that the same kinds of things are happening. so we keep a strong labor market. housing services inflation comes down, goods and services -- goods inflation settles down, and, you know, non-market services return to their prior level. all of those things should happen over time, and, you know, those pieces come together. there's every reason to think that they will. the timing of it is highly uncertain. you're not wrong though that we've -- it's been frustrating because while we've made progress, it has been slower than we'd hoped.

nonetheless, we're still on track, and i think if two years a ago you had said we were at 2.8% inflation, people would say i'll take that. i mean, that's a pretty good interim place to be. job's not done. but i think we're feeling good about where we are and where we're headed. finish. >> let's go to nancy for the last question. >> reporter: hi, chair powell. nancy marshall again, sir, from marketplace. you said a couple of times inflation if has been moving sideways. if you know, it appears to be settling in around -- excuse me -- 2.5%. do you think the fed is just going to have to settle for that and accept that you're not going to get to your 2% target? >> no, we're not going to settle for that. i think, you know, we certainly have every intention and didn'tation -- expectation that we'll get inflation back sustainably to 2. and i am confident we will

achieve that. it has taken longer, but it's -- you have to be, you know, we are making progress. we have made a great deal of progress, and we'll continue to do so. and get back to 2% inflation. that that's what we owe the prick and, you know, we're committed to achieving it. >> reporter: in that case, can you rule out a rate hike next year? >> you don't rule things completely in or out in this, in this world. that doesn't appear to be a likely outcome. i think we're at 4.3%, and that's meaningfully restrict the we've. restrictive. i think it's a well-calibrated rate for us to continue to make position on inflation while keeping a strong labor market, so thank you very much. liz: the market's having quite a visceral reaction to federal reserve chair jerome powell's comments at the fed's final news conference of 2024. so basically just one hour after the fomc announced it cut

interest rates by 25 basis points which was widely expected, and it's the third chop this year, powell struck a tone that markets are reading as extremely cautious about further interest rate easing due to a, quote, remarkable economy, one he does not want to derail by aggressively cutting interest rates which could risk reigniting inflation. and the so-called dot plot if says it all with this red on the screen. this is the gauge of expectations by every member of the federal reserve. it may look like little lines to you, but the majority of 19 fed members feel that four rate cuts next year are no longer appropriate, and they have downgraded that to two rate cuts. look at the market reaction as seen in intraa day chats here. after -- charts here. after yesterday's selloff, the dow is facing a tenth session in a row of losses. the intraday shows pretty much the dow saw kind of an energetic bounce at the opening bell,

jumping as high as 29239 points -- 239 points, but right now we are falling 544 points. from peak to trough, the dow has swung about 868 points. 6,000 level are on the s&p 500 is in jeopardy. actually, there it goes, 5953 right now. look at this fall in the s&p. we've got it down 95 points or 1.5%. and the intraday of the nasdaq is really, well, you could call it interesting or gut-punching here. five minutes after the open it plummeted to about 20,041. then it popped up by about. 70 points, and now you can see completely reversing, down 424 points. that is the worst move in about a month for the nasdaq. huge move in the 2-year yield, and this is where you see things go up here. it most closely tracks federal reserve policy. it's at 4.35%, but right before the fed's announcement at 2 p.m. eastern it was yielding 4.21%.

so we're looking at a 10.9 basis point jump here. and if we could, let's flip it over, i know we're to going fast, but the 10-year yield which began a -- the morning around 4.4%, inched down to 4.39% before the announcement and nows has jumped 9 basis points to 4.49%. when yields rise, it's an indication that the market believes we're not going to see that many interest rate cuts. now, the vix, the volatility -- look at this intraday. it showed no fear at the opening bell. it was down about 4.7%. complacent. but about 2:15 p.m. eastern, it started to rise. it rose, i guess, from down 4.7% to up 3.7%. check it here, it's jumping 21%. gold, which is an interesting flight to safety, is not behaving that a way right now. we've got gold calling -- falling 1.6%.

the dollar move is pretty incredible. we are seeing an extreme strength in the u.s. dollar as it faces off against a bunch of other top currencies here. particularly the euro which just, what, about a week ago was at about $1.07, it's now just $1.03 as the dollar muscles higher against the yen, the pound if sterling, euro and the yuan. fed chair powell said caution is reigning at the fomc when it comes to policy make. listen to how he put it. >> some did identify policy uncertainty as one of the reasons for their writing down more uncertainty around inflation. and, you know, the point of that the unis serbty is it's -- uncertainty is it's kind of common sense thinking when the path is uncertain, you go a little slower. it's not unlike driving on a foggy night or walking in a darkroom full of furniture. you just slow down.

so that may have affected some of the people. but there's a range of approaches on the committee. liz: yeah. well, the range, the median range, is what has the dow and the nasdaq and the s&p falling. look at the dow, down 638 points. the low of the session, a loss of 641. we are right there now, folks. let's bring in some voices who understand all these movements, asset management chief economist, market strategist and fed critic peter schiff and global fixed income head andy brenner. andy, the bond market is gyrating in a pretty dramatic way. what is the message here? >> this is the first hawkish cut that a we've seen in a long time, and it came out both from the fed governors and in the press conference. so you reversed a lot of what we've seen is. this is the first time in a long time we've actually seen two years yield more than fed funds. we've not seen that in -- liz: okay, give in english to people who don't understand that. >> the 2-year is back to 4.35,

the fed funds are now down to 4.32. so this is the first time -- it may not sound like much, but this is the beginning of the normalization of the yield curve. when the fed funds is now going to be the lowest yielding thing out there which is going to change the bell market as well as the curve, and we're seeing a flattening going on right now. liz: peter, the markets having a tantrum. you can't call it anything else. and i don't know why. because the federal reserve, the chair, said the economy is remarkable, it's incredibly strong. of they just don't want to risk reigniting inflation, so maybe they'll only see two rate cuts. what do you read into this drop of 644 points for the dow and the rest of the indices that are falling? >> well, this may be just the beginning here. we may be getting a bear market for christmas, and that might be the environment that trump inherits when he, you know, becomes president in january. you know, investors were very complacent about the risks of

rates not being cut as much as they thought. powell finally today to was reluctant to admit that inflation is not only headed up, it's higher than the fed expected. and and powell thinks it could take another two years to get inflation back down to 2%. now, he's wrong, inflation won't be anywhere near 2% in two years, it's going to be higher. powell's still wrong about inflation and the economy. you know, he's very optimistic on the economy. the reason that donald trump was elected was because the economy's actually very weak, and the data points that out. powell is overlooking all the revisions we've had, the massive downward revisions to prior payroll reports. so i think it's stagflation that we have, and i think that's going to get if worse. but, you know, investors were very optimistic coming into today. this is a reality check and, unfortunately, reality is a lot worse than investors perceive. this is going to be, i think, what, the tenth straight down day for the dow? that's the biggest losing streak since 1978. if it goes down two more days,

it'll be the biggest losing streak in the history of the dow. liz: okay. and maybe it really all centers on the fed funds projections for what we expect to be that fed funds rate, andy, in september. just two months ago it was -- well, three months, 2.5%. it was 3.4% for 2025. that's the the fed's benchmark interest rate. today that's been moved up for 2025 to 3.9%. that is probably why you start seeing these big moves in the bond market and the big drops in the stock market, correct? >> absolutely. let's go, let's be realistic. the worst predicters of where fed funds are going to go is the fed itself. their track record is abusiness massachusetts -- amaze -- abysmal. powell said today he only thinks that the unemployment rate will go from 4.2 to 4.3.

well, it's 4.246 right now, you think it's only going to go up half a percent? citi has it going to over 5% in the first quarter. he's going to be the wrong, the fed's going to be wrong, and they're going to have egg on hair face for this hawkish ease that they did today. liz: hawkish ease, meaning we'll ease today but don't get excited, that's not going to happen. peter, i do have to ask you because you're talking about a potential bear market for christmas? we've seen a speculative frenzy -- >> well, i don't know that it'll be a bear market -- [laughter] liz: that's what you said. i'm just quoting what you said a few seconds ago. >> yeah, no, no, no, it's a bear market in that if the market ultimately declines by 20% from here, then we're in a bear market, we just won't know it until after christmas, but we would be in the bear market for christmas. you know, i think powell is speaking out of both sides of his mouth as well because given what he acknowledged aboutflatio

cut rates today. it made no sense to indicate that more rate cuts are coming. if nicker powell should be fessing up to the fact that they started cutting too soon. in fact, they aborted their hiking too soon. rate rates never really got into restrictive territory, and they're still not. we have record amounts of debt, and that's because the fed has kept interest rates too low. so they started the inflation fire, and now they're been pouring gasoline on it. liz: okay. again, you look at the year to date on these markets, and the fed's been paused. and before that they hiked rates pretty dramatically to try to bring inflation down. and he basically said very clearly, we have avoided a recession. do you believe that, andy? will he be right or wrong on that? >> he will be right on that, but i think the labor economy is much weaker than he anticipates. i think that's his biggest concern, and i think you'll see the fed ease much more aggressively than the markets are building in.

right now for january they're 20 the to 1 against another cut. you know, i think that that will come back depending on the next employment number. but as peter pointed out, you've had a lot of rescissions -- revisions on employment numbers, 818,000. i think the economy is much weaker than people anticipate. i believe powell knows that, but the rest of the fed governors do not. liz: i'm looking at -- >> i don't think we've avoided -- liz: hold on. peeved peter, peter -- [laughter] wait one second. 90% odds of a pause if in january. go ahead. >> yeah. well, that's very likely. but, you know, i think the economy, as i said, may already be in recession, it may have been there for a while. inflation can disguise a recession because by make all the prices go up, it looks like the economy's getting stronger, but it's not. inflation is getting stronger. and that's ooh why the voters, if you look at the exit polls, the number one issue i was how weak the economy was. if the economy was as

magnificent as a powell thinks, trump wouldn't have won. and so i think a lot of that reality is going to raise its head in 2025. and so i think even if the fed does pause, they will eventually resume the cuts. but not because inflation's come down, but because the economy's come down. i think you're going to see a much bigger back up in unemployment, weakness in the economy, and the fed is going to ignore the strength of inflation and cut anyway. and, in fact, i still think they're going back to quantitative easing. and so that's why i think, ultimately, what's happening now in the dollar and in gold is a head fake, and i think the real trade is selling dollars and buying gold because we're going to get cuts, but we're going to have it in a stagflationary environment. liz: okay. both of you, thank you very much. andy brenner, peter schiff. folks, look at the dow jones industrials, we've just made a new low of nearly 700 points. the big loss at the moment, down 668. we've got the s&p down 118 right

now, and the nasdaq lower by 548. russell's just getting killed. small and mid caps down 3.5% or 8 the points -- 82 points. we have this fox business alert, m and t the bank has just decreased its prime lending rate to 7.5% from 7.75%. that in light of today's quarter point cut, but who knows what they are going to do next year if there is a pause and then another pause. we don't know. but the fed has indicated no longer four rate cuts expected next year, just two because, as a jay powell put it, the economy is, quote, remarkable. stock market is not remarking right now. in fact, maybe the losses are. dow heading for a 10-day losing streak. we've just hit a session low of 733 points. stay right here, folks. we are blowing out commercials because this is a pretty significant drop the of 1.7% at the moment. this is the worst day for the dow since september 3rd. we should look at some of the names here. boeing, nvidia, united health

care. they are still the dow's leaders from this morning, but the dow is headed toward a 1,000-point swing from the top to now the bottom after the fed's summary of economic projections, the sep, showed only two rate cuts next year. that's really at the heart of all of this. so when you see9 that the s&p is now considerably below 6,000 at 5,919 and and flint over to the nasdaq -- flip it over to the nasdaq, pretty much at the lows of the session, the nasdaq going into today looked to see a gain of more than 30% year the date. and we have it now down about 3% to -- down 595 points to 19,509. and we're looking at pretty much a serious, brutal scratch by the bear. let's get right to the floor show and talk stocks. maybe some discounted names. right now joining me is kenny polcari and jpmorgan's chief

market strategist for the america, gabriela santos. okay, kenny -- [laughter] this is, i think the market's trying the send a message here. >> i think the market's absolutely trying to send a message, one actually that i'm welcoming, right? i think it's overdone. i think the market got ahead of itself. the 25 basis points was expected, but i think his language for next year leaned more hawkish, which is why they're stamping their feet. because he said two cuts in '25, and they're all screaming for more, and they didn't get it. now they're going to stamp their feet. i actually as a wealth manager and long-term investor, i love this. i don't -- this is not a crash here. the dow's down 1.7%. it's not the end of the world, right? it's up 27% year the date or 22%, so i'm not at all worried about this. in fact, i've been writing in my note the short-term trend line is 5900 which we're probably going to hit if this keeps going like this in another half an hour which actually would be good. liz: look at these dow losers, gabriela, goldman sachs down

4.33%. why do you think that is? why do you think a big financial is taking such a hit? >> i think, first, as kenny was saying, i think it's just we had a very strong run going into what are really the last few days of the year here. things that have done double-digit, over 20% return like financials, like certain consumer discretionary companies, tech companies just seeing a little bit of profit taking. i was honestly surprised, i thought this was going to be a bit of a boring meeting. i think what the market is reacting to is not, you know, that the fed took out two rate cuts next year, but the reason why. there was no mention really about economic resilience, no mention about the increase in productivity, it was not about solid economic growth really. the emphasis really was placed on inflation and upside risk to inflation. and for the market, that's when an increase in yields becomes a challenging aspect. but in the short term, we would

very much read this doesn't change the narrative for us which is positive for stocks next year. liz: what we have seen, kenny, is days like this may be scary, but in the rearview they look like great buying opportunities. give me your postmeeting picks here. >> financials, industrials. to your point, look at goldman sachs. it's been outperforming all year, it's pulling back. i think it will continue to pull back, but as a long-term investor, you have to look at those lairs, right?? -- areas, right? financials, industrials, basic materials, ones that are getting arbitrarily dislocated because, a, people stamping their feet, b, you know, some big asset managers are raising cash so they go to where they can versus where they should, and is some of these big names get dislocated. that's where your opportunity's going to be. maybe jpmorgan, blow owl, caterpillar, other industrial names that we love. liz: yeah. and that have gotten extremely expensive. >> correct. but if we see this pullback

that's coming starting today, if this continues for a couple of days, some of these stocks will take some of the froth out and set you up for an opportunity the as a long-term wealth -- long-term investor and wealth adviser. liz: what he said about a prices was very interesting to to me. you know, that was a big campaign discussion. donald trump went on and on about how high prices were. he blamed joe biden. prices are the sticky. if you look at the most recent core cpi at 3.3%, it matched expectations, but it was hotter than the prior month, gabriela are. let's listen to what powell said about prices, and then we'll talk about what may be an opportunity for price-sensitive stocks. here's powell. >> what i think people are feeling right now is the effect of high prices, not high inflation. so we understand very well that prices went up by a great deal, and and people really feel that. and it's prices of food and transportation and heating your home and things like that. so there's tremendous pain in

that burst of inflation that was very global. this was everywhere. the best we can do for them -- and that's who we work for -- is to get inflation back down to its target and keep it there. liz: target he reiterated was 2%. we're at 3.3%. friday i would let our viewers know we're getting the fed's favorite inflation gauge, pce for november. if you look at, kind of reverse engineer it and say which sectors have been able to keep their price increases in place, i mean, we saw mcdonald's e and starbucks get hammered, their stocks, because, you know, customers were saying we're not going there nick anymore. your prices are too high. but who's been able to keep them there? >> i think powell in the clip you played was making that classic economist, monetary policy differentiator about inflation, right? the level of prices, which surged over a period of a couple of years what normally would have taken six, seven years to

do and that's what consumers are clearly feeling and then the year-over-year inflation concept which is how economists think about inflation. i think if you think about the level of prices, this is something that consumer-oriented companies have been talking about every earn earnings season this year, mentioning that consumers are a lot more choiceful, they're a lot more focused on discounts, and this is what's led to the huge dispersion in performance within consumer-related stocks. the ones that have been able to keep the consumer in the door are more of your consumer essentials and services which are more geared towards high income consumers. but i'm a bit confused about how the fed thinks about inflation, i have to be honest, liz. they were not worried about the year-over-year increase in inflation before, and then the all of a sudden they're really worried about it again. and i think it's much more related to policy next year. there was a whole discussion of tariffs. liz: kenny and gabriela, great to see you. not great to see if you are long stocks the dow jones industrials

right now, down 928 points at the moment. and we continue to watch -- okay, so, listen, if you need to to borrow money, it's still going to be expensive. look at the 10-year yield right now if we can. it is now, just a second ago it topped 4.5%. for the 10-year yield. so we're talking about rising interest rates in realtime. and that's -- there it is, 4.5% here, up 10 full bay points. can we flip it to the 2-year? it's now at 4.348%. this morning it was at 4.25%. wow. so up 10.7 basis points here. the headlines are moving fast and furiously here, folks. we've got to look at some individual names. close to the top of the s&p 500 still, i mean, it's been there for much of the session after the lek on the -- electronic components estimate beat on better demand for data center

trump benefiting from the surge in a.i. technologies. it's holding on to a 5.33% gain which is pretty impressive. it was up -- just so you know, a key supplier to apple and makes assemblies for systems for automotive, cloud services and commercial drones. we've got a potential auto deal that broke thi it's got investors into overdr japanese automaker honda is now confird nissan have been exploring a merger or other future collaboration. but as of now no final decision has been made. the two companies had announced back in marsha they'd started a feasibility study for a strategic partnership. at the moment we've got nissan up 17.5%. honda losing 5%. and buy now, pay later firm sessel shares, a short seller says they're borrowing expensive capital to make extremely risky

loans even though the platform is hemorrhaging customers. is so right now it's falling 25%. but it's gained 1600% in the past year. it's been a real high flier here. hindenburg says it does not see the firm, quote, surviving. we're waiting on a comment. in the meantime, back to federal reserve chair jerome powell. his last fed meeting under the biden administration and the following press conference. president-elect donald trump has actually said in the past couple of days, you know what? i'm not going to try and remove jay powell from his post. but "the wall street journal" editorial board says a different fed decision maker should get the boot. forget about powell. that decision maker would be federal reserve vase chair of supervision michael barr. the journal editorial board writing that trump would have with, quote, good cause to remove barr given his regulatory failures and that markets might even cheer his removal.

the article basically slams barr as being more focused on risk management and the process of that than actual financial risk. and because allegedly he was asleep at wheel that led to the regional banking crisis that tanked signature bank, first republic bank and, of course, silicon valley bank. joining me now is somebody who knows a thing or two about the leg regulatory job and the reason why the regional bank crisis came into effect. and it has a lot to do with rising interest rates. former vice chair of the federal reserve for supervision spgz randy quarrels. good to have you. let me get your reaction on the market's response to the federal reserve saying, you know what? the economy is good, we don't see recession and, therefore, we don't need four cuts next year, we need just two. >> well, liz, it's good to be, it's good to be here. thanks for having me. you know, i think the fomc, the sep, the summary of economic

projects, this time is in line with what i've been saying for a while is that the amount of stimulus in the economy is going to result many some continuing inflationary pressures. it's going to result in a slower path of interest rate reductions and a higher level of interest rates at the end of it. and both the fed and the markets have been projecting this a few months ago. and because that has been contrary to market expectations, i think you're seeing a reaction to that. i think it should have been predictable, but throughout this whole cycle of inflation and the fed if response to inflation, the markets have been excessively optimistic about when interest rates would be coming down. liz: well, part of the problem in march of 2023 when we saw the regional a bank crisis triggered by the failure of silicon valley bank and the f fdic having to step in, was that we had seen incredibly high interest rates. the fed was on a hiking i move, a big cycle here because of high inflation. so you want to make borrowing more expensive so that it tamps

down people spending too much, and then we would positively get a response with lower inflation. but, you know, the criticism about michael barr who was the regulator of banks, supposedly, at the federal reserve was that rising interest rates in 2022 and 2023 were what could really ca cause some major dislocations on bank balance sheets. because those rates that they had borrowed at low, you know, they were resetting at very high rates, and that was going to point to loss are on the balance sheet. and we saw a very, very bad. response to that. what do you make of how the fed handled that? and he had replaced you on that position of oversight of banks. >> yeah. well, i'm not going to personalize it to michael barr, but there has been an issue for a long time with respect to supervisory practices at the fed, at the bank regulators in general where there is an

excessive, obsessive focus on process and not a lot of focus on actual risk. while i was there at the fed, i went around to all of the supervisors in all of the 12 reserve banks and essentially made that point, that we need to be focusing particularlyly on interest rate risks, only quid liquidity risks with respect to -- on liquidity risks and be very aggressive in ensuring that we brought those to the tanks' attentions, that we addressed those and to deemphasize the sort of miasma of process that had developed around the supervisory, around the supervise ifly activity. supervisory. i think the failure of those banks in march of 2023 was an example of, you know, of that change not having been made. svb was not undersupervised. it had, you know, it had 32 supervisory actions against it. but none of them really had to do with the core risks. that were facing the bank.

they didn't focus in the way that i'd been trying to get the system to to focus on, on actual interest rate risk and liquidity risk. it was, again, a lot of process about keeping track of laptops and the accounting procedures. and all of that's worthy, but i hope that this has been sort of a wake-up call that we need to accelerate that evolution and supervisory -- liz: okay. maybe we can put up both the 10-year and the 2-year. keep randy on the screen, if we can. we are seeing rising interest rates in a very dramatic fashion. i put on your bank examiner of balance sheets hat if you could right now. i know you're not in the position told, but what can you project? i mean, what do you see through a very, very focused prism that could be a problem when you see the 2-year jumping 9.4 basis points and, by the way, that's yielding more, i think, than the expected fed funds rate. and then the yield for the 10-year up 9.4 basis points.

what kind of dislocations or problems could this cause on regional banks' balance sheets or maybe even the big names? >> sure. well, you know, throughout this inflationary if response a lot of financial institutions have been under pressure as you were describing earlier. the value of their interest rate seven ty assets was falling -- sensitive assets was falling. and everyone, those institutions, markets, the fed have been expecting that pressure to abate as a interest rates fell. now the fed and the market are saying that those pressures won't abate as quickly as some had been expecting, so will that continuing pressure result in some financial sector disruption? i don't think so. some institution won't make it, but it could be more senate than i'm thinking. and if it is, you know with, that could be a black swan that's out there that people aren't currently expecting. thaw thought, well, we're on the other side of that pressure, on the financial system from higher

interest rates. and we're not quite on the other side of it yet. liz: does it surprise you the big financials, jpmorgan, goldman sachs, morgan stanley, citi all falling -- well, look at morgan, down 5% at the moment. i believe goldman sachs is the biggest laggard on the dow jones industrials. does it surprise you that they're getting hammered like this? >> well, i mean, it doesn't surprise me as a one-day effect. i don't think that particularly those large institutions, that this is in any way a dramatic event for them. i expect those stocks will recover somewhat over the short period. but it is not, you know, higher interest rates are in this circumstance given the effect on bank balance sheets is, you know, it can be a double-edged sword, and it will certainly have an effect. and this is a change from what markets have been expecting about the path of interest rate policy that will affect constitutions. liz: randy, thank you very much

for your perspective on this pretty dramatic fed meeting day of 2024. all right, folks, we do need to show you the dow industrials right now down 9544 points, but we just -- 954 points, but we just a few seconds ago saw the dow falling 1,141 points. it has not fallen 1,000 points since back on october 5th. particular sectors, we should look at social media stocks. they are tumbling along with the rest of big tech. meta, alphabet and pinterest down about 3% apiece. and some of that may have to do with pick doc making headlines -- tiktok make headlines after the supreme court agreed to hear argues of tiktok challenging a law -- arguments that would force bytedance to either sell the social media app or be totally banned in the united states on january 19th. charlie. >> liz, i would say this, i think the trump administration is inclined in many quarters, in

many quarters i should point out, inclined to figure out a way to keep them in the united states. i mean, that's all the word i'm hearing from people close to trump, that he's actually said it. he's got a soft spot in his heart because tiktok helped him win the election. there was a prolot of pro-trump stuff -- pro-trump stuff. except for one person in the administration, and i just wonder how much this person has the president's ear or if he can make a convincing argument or he'll just give up this fight to focus on other stuff because there's a lot of stuff on his plate. i'm talking about brendan carr. he's going to be the fcc chair. he's already tweeted about a story i broke a couple days ago, about how he was going to essentially put a stop or a pause on the skydance merger with paramount, right? so he can force cbs to abide by what he says is, are the fcc rules demanding fairness. he thinks cbs is not fair, and

he's basically say is, -- saying i'm not going to approve their local licenses. so he's got a lot on his plate. he's been a huge critic of tiktok. it's in the dichotomy of the trump camp, and i'm sure the political types are saying, hey, these guys helped us. this was a great venue for us. we've never been throttled on tiktok. it helped us get our message out to young voters, the president-elect. but you're going to have brendan carr saying everything i've known about tiktok, and he's done a deep dive into this on your show, you've had him on talking about this, that he believes tiktok is the chinese surveillance tool using bio-- i think the claim is, and tiktok denies this, by the way, using biometric markers to create, you can create false identities and, you know -- liz: false flags and all kinds of things that make americans fight with each other -- >> that's a whole -- >> and drive wedges.

>> that's a whole other everybody i shoo. this is the -- issue. this is the espionage issue which brendan's talking about. but, yes, there is a scroll debate going on in shrink-like circles. social media and its deleterious effects on young people and how tiktok causes people to fight with each other. there's a lot here. i, you know, they're going to rule on this before trump takes office, so it's, it might be a moot point by the time trump gets it. they may say you can ban 'em and they're done, because joe biden is still president until january 28th. excuse me, 20th. january 20th is my birthday. that's why i said that. liz: okay, we'll remember that. >> that's the only reason why i said that. liz: the dow is now down 1,035 points. we are getting an indication a this is not entirely the federal reserve. in the last couple of minutes donald trump has told fox news he is, quote, totally against the proposed continuing

resolution bill that has just been floated by congress. and a lot of people haven't had a chance the read it. it's more than 1700 pages. that spending bill liz: again, please keep in mind that the house is controlled by republicans so this is a lot at the moment and considering we do see a big drop here, we do see the nasdaq down 648 points, s&p down 163, so maybe not entirely driven by the federal reserve saying the economy is strong, so, only two rate cuts next year versus four. joining me now with $4.73 trillion in assets under management, state street chief investment strategist michael aroni. michael, a couple of moving parts here, but at the moment let's stick with the markets and this reaction. would you be recommending people picking up some names on discount at this hour?

>> i absolutely would, liz. i think that investors need to take a giant step back and realize that chairman powell isn't the grinch that stole the market santa claus rally and in fact what did the fed do today. they acknowledged that the economy was stronger than they expected. the labor market better-than-expected and the consequences is that it's going to take a little longer for inflation to come down and fewer rate cuts to get there. at the end of the day this is a buying opportunity and an over-reaction by markets to this news. liz: do you think in the rear view mirror this will look like a good buying opportunity? >> potentially i do think the risks are and you've been highlighting real rates accelerate beyond a certain level, so 4.75, 5% on 10 year treasury yields seems to be that level but we're hitting a sealing i think it's an over-reaction and as a result, i think that inexpensive parts of the market that should benefit from a stronger economy,

some of the trade protectionism, and trump policy next year, like regional banks, like small caps, and certain technology companies are positioned well and now you can buy them on sale. liz: okay the market is spooked folks. we've got the vix, the volatility or fear index up 50% right now. that is a very big move at the moment, and so is this. 1,080 point loss on the dow jones industrials. michael what happens tomorrow, market bounce? >> i do think you'll get a market bounce. i think that investors will digest what happened with the fed and recognize this isn't the end of the world. >> [closing bell ringing] >> look for the market to bounce into the year-end. liz: got it and we'll be here tomorrow to see if that bounce comes through on a tough market day. larry: hello folks welcome to kudlow i'm larry kudlow. so, the fed is bundling policy left and right. meanwhile tax cuts still look to be